Retail sector takes foothold on economy

April 20, 2011

Shares

By CORRESPONDENT, NAIROBI, Kenya, Apr 20 – The formal retail sector may be the next most sought-after economic investment sector and formal employer in the next five years, regional retail chain Nakumatt Holdings has disclosed at the ongoing Africa Investment Forum in Dar Es Salaam, Tanzania.

However, the sector urgently requires a Retail Development Policy and recognition as a key economic driver to facilitate its growth to the next level.

Speaking at the forum that was opened by President Jakaya Kikwete and also attended by regional Heads of State including President Mwai Kibaki, Nakumatt Holdings Business Development Director Neel Shah disclosed that the formal retail trade across the region is currently serving less than 80 percent of the addressable market.

"With a population of more than 140 million people, the East Africa region provides a vast retail market for formal retail traders who can target to cover half of the current population with daily turnovers of more than Sh1.4bilion at a very conservative rate of Sh10 spend per customer," he said.

He added that the current regional population has an opportunity to sustain at least 10 major retail stores in each town and is presently generating a US$300 million turnover amongst the major players.

In the next 10 years, Nakumatt Holdings is forecasting that close to 25 million customers across the region will have access to formal retail trade facilities with monthly sales reaching the US$700 million mark and selling space reaching close to 40 million square feet up from 15 million sq feet today.

In the presentation touching on the East Africa region\’s retail trade investment opportunities, Mr Shah stressed that formal retail players are heavily contributing to economic growth and are currently the second leading formal employers.

"Nakumatt Holdings is keen to facilitate the upgrade and development of our regional retail trade from its current informal classification to a more formal classification which can guarantee better returns for the population," Mr Shah explained.

"At the current market coverage, the formal retail trade is by far an investor\’s haven and will without doubt be the next most sought after economic sector in less than two years."

However, lack of an ideal formal retail trade sector development policy has served to dampen investments in the sector. And notwithstanding its economic sectoral importance, only the Jomo Kenyatta University of Agriculture and Technology (JKUAT) has diploma level retail management training course.

The recognition of the wider wholesale and retail sector as the second most dominant economic sector after agriculture is a key pointer of the salient potential that needs to be harnessed both by the foreign and home-grown retail trade players.

Though still at its infancy, Nakumatt Holdings estimates that the regional formal retail sector featuring outlets covering more than 3,000 square feet and above are still well below 400 stores. In Kenya, the leading players alongside Nakumatt include Uchumi, Tuskys, Naivas, Ukwala among others.

The regional retail sector, Mr Shah pointed out was currently skewed and tilted heavily to informal operators who can easily be mobilized to form investment companies and engage in formal retail trade with better returns.

Financial institutions such as banks also stand to reap further benefits with the ongoing retail sector development by providing much needed consumer finance for credit purchases and capital expenditure for property development of facilities such as shopping malls and warehouses.